By Yoshifumi Takemoto and Makiko Yamazaki
TOKYO (Reuters) – Japan’s government on Friday lowered its GDP growth forecast for the current fiscal year as weaker exports drag on a fragile economic recovery.
In its revised estimates, the Cabinet Office cut its inflation-adjusted gross domestic product growth forecast for the current fiscal year ending in March 2025 to 0.7% from 0.9% projected in July.
The new downgraded forecast follows a similar cut to the outlook in July, but is still above private-sector forecasts for 0.5% growth. The growth projection for the next fiscal year was kept at 1.2%.
The government releases its economic growth forecasts in January and then revises them around July. A revision this time of the year is rare, however, and highlights the growing pressure on the economy from cooling global demand and fragile domestic consumption.
The Bank of Japan maintained ultra-low interest rates on Thursday and said risks around the U.S. economy were somewhat subsiding, signalling that conditions are falling into place to raise interest rates again.
But any prolonged weakness in both global and domestic demand could slow the BOJ’s plans to fully exit from a decade of easy monetary conditions.
The forecasts serve as a basis for compiling the state budget.
“As high prices are hard hitting low income earners, measures should be launched to help support their lives,” the Cabinet Office said.
The private-sector members of the government’s top economic council also called on the government to implement effective and sufficient economic measures to help recover momentum in private consumption.
Prime Minister Shigeru Ishiba’s administration has pledged to draft a large spending package later this year to cushion the blow to households from rising living costs and support the broader economy.